Case Study: Construction Funding

by | 22 Jun 2021 | Property, Property Development, Residential

We regularly assist developers of all shapes and sizes by understanding their project goals and objectives, then structuring & negotiating optimal funding solutions.

Recently, STAC Capital’s Leigh Blain assisted a client who are experienced developers based in Brisbane’s western suburbs.

The Client

They specialise in delivering large boutique owner-occupied apartments.  In the past, this client had to achieve pre-sales to meet bank requirements (50% debt cover at that stage in time).

The client approached STAC to find a solution with no pre-sales and as much leverage as possible, with existing debt already on the site.

The Challenge

The issue was that in order to achieve pre-sale hurdles, they had to sell units at a discount, which accordingly had a significant impact on the profit of the project as well as impacting retail valuations of stock that were not sold at a discount.

The Outcome

STAC managed to arrange a facility at 90% of TDC (Total Development Cost) under a uni-tranche facility with a single lender, at a Weighted Average Cost of Capital of 10.3%.

This meant that (1) minimal further equity was required into construction, (2) works could commence immediately and (3) units could be sold through construction without a discount being applied, thereby maximising the value and profit of the project.